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Perry Ellis International Reports Third Quarter Fiscal 2013 Results

Balance Sheet Update

George Feldenkreis, Chairman and CEO of Perry Ellis International commented, “We are extremely pleased with the continued strengthening of our balance sheet. Inventory reduction continues to tighten ahead of sales. We believe that we have the balance sheet to fund our growth in our core businesses as well as provide ample capacity and liquidity under a wide range of economic conditions.”

The Company ended the third quarter of fiscal 2013 with $51.7 million in cash and cash equivalents and full availability under its senior credit facility. Inventories at quarter end totaled $157.5 million, a reduction of $40.8 million or 21% compared to $200.3 million as of October 29, 2011. As a result of the disciplined management of inventory, the Company ended the period with a net debt to total capitalization of approximately 25% as compared to 32% for the comparable prior year period.

Fiscal 2013 Guidance

The Company remains comfortable with revenue guidance ranging from $990 million to $1 billion, as well as fully diluted earnings per share as adjusted in a range of $1.75 to $1.80.

About Perry Ellis International

Perry Ellis International, Inc. is a leading designer, distributor and licensor of a broad line of high quality men's and women's apparel, accessories and fragrances, as well as select children’s apparel. The Company's collection of dress and casual shirts, golf sportswear, sweaters, dress pants, casual pants and shorts, jeans wear, active wear, dresses and men's and women's swimwear is available through all major levels of retail distribution. The Company, through its wholly owned subsidiaries, owns a portfolio of nationally and internationally recognized brands, including: Perry Ellis®, Jantzen®, Laundry by Shelli Segal®, C&C California®, Rafaella®, Cubavera®, Ben Hogan®, Centro®, Solero®, Munsingwear®, Savane®, Original Penguin® by Munsingwear®, Grand Slam®, Natural Issue®, Pro Player®, the Havanera Co.®, Axis®, Gotcha®, Girl Star®, MCD®, John Henry®, Mondo di Marco®, Redsand®, Manhattan®, Axist®, Farah®, Anchor Blue® and Miller’s Outpost®. The Company enhances its roster of brands by licensing trademarks from third parties, including: Nike® and Jag® for swimwear, and Callaway®, PGA TOUR® and Champions Tour® for golf apparel. Additional information on the Company is available at http://www.pery.com.

Safe Harbor Statement

We caution readers that the forward-looking statements (statements which are not historical facts) in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current expectations rather than historical facts and they are indicated by words or phrases such as "anticipate," "believe," "budget," "contemplate," "continue," "could," "estimate," "expect," "guidance," "indicate," "intend," "may," "might," "plan," "possibly," "potential," "predict," "probably," "proforma," "project," "seek," "should," "target," or "will" and similar words or phrases or comparable terminology. We have based such forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements, many of which are beyond our control. These factors include: general economic conditions, a significant decrease in business from or loss of any of our major customers or programs, anticipated and unanticipated trends and conditions in our industry, including the impact of recent or future retail and wholesale consolidation, recent and future economic conditions, including turmoil in the financial and credit markets, the effectiveness of our planned advertising, marketing and promotional campaigns, our ability to contain costs, disruptions in the supply chain, our future capital needs and our ability to obtain financing, our ability to protect our trademarks, our ability to integrate acquired businesses, trademarks, trade names and licenses, our ability to predict consumer preferences and changes in fashion trends and consumer acceptance of both new designs and newly introduced products, the termination or non-renewal of any material license agreements to which we are a party, changes in the costs of raw materials, labor and advertising, our ability to carry out growth strategies including expansion in international and direct to consumer retail markets, the level of consumer spending for apparel and other merchandise, our ability to compete, exposure to foreign currency risk and interest rate risk, possible disruption in commercial activities due to terrorist activity and armed conflict, and other factors set forth in Perry Ellis International's filings with the Securities and Exchange Commission. Investors are cautioned that all forward-looking statements involve risks and uncertainties, including those risks and uncertainties detailed in Perry Ellis' filings with the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which are valid only as of the date they were made. We undertake no obligation to update or revise any forward-looking statements to reflect new information or the occurrence of unanticipated events or otherwise.
               
PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA (UNAUDITED)
(amounts in 000's, except per share information)
INCOME STATEMENT DATA:
Three Months Ended Nine Months Ended
October 27, 2012 October 29, 2011 October 27, 2012 October 29, 2011
 
Revenues
Net sales $ 229,330 $ 242,116 $ 691,436 $ 733,487
Royalty income   6,918   6,304   19,772   17,657
Total revenues 236,248 248,420 711,208 751,144
Cost of sales   160,453   165,970   478,348   499,456
Gross profit 75,795 82,450 232,860 251,688
Operating expenses
Selling, general and administrative expenses 63,984 66,356 196,434 193,101
Depreciation and amortization   3,424   3,369   10,314   9,982
Total operating expenses   67,408   69,725   206,748   203,083
Operating income 8,387 12,725 26,112 48,605
Costs on early extinguishment of debt - - - 1,306
Interest expense   3,689   3,868   11,011   12,303
 
Net income before income taxes 4,698 8,857 15,101 34,996
Income tax provision   1,518   2,348   4,687   11,262
Net income $ 3,180 $ 6,509 $ 10,414 $ 23,734
 
Net income, per share
Basic $ 0.22 $ 0.42 $ 0.71 $ 1.58
Diluted $ 0.21 $ 0.40 $ 0.68 $ 1.47
 
Weighted average number of shares outstanding
Basic 14,662 15,317 14,669 15,009
Diluted 15,295 16,391 15,275 16,131
   
PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA (UNAUDITED)
(amounts in 000's)
   
BALANCE SHEET DATA:
 
As of
October 27, 2012 January 28, 2012
 
Assets
Current assets:
Cash and cash equivalents $ 51,659 $ 24,116
Accounts receivable, net 154,947 145,563
Inventories 157,473 198,264
Other current assets   28,789   33,733
Total current assets   392,868   401,676
 
Property and equipment, net 54,337 56,496
Intangible assets, net 248,517 242,634
Goodwill 13,794 13,794
Other assets   9,296   9,595
 
Total assets $ 718,812 $ 724,195
 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 89,418 $ 80,253
Accrued expenses and other liabilities 21,058 23,142
Accrued interest payable 1,018 4,186
Unearned revenues   4,363   4,179
Total current liabilities   115,857   111,760
 
 
Long term liabilities:
Senior subordinated notes payable, net 150,000 150,000
Senior credit facility - 21,679
Real estate mortgages 24,415 25,114
Deferred pension obligation 15,618 17,326
Unearned revenues and other long-term liabilities   34,170   31,821
Total long-term liabilities   224,203   245,940
 
Total liabilities   340,060   357,700
 
Equity    
Total equity   378,752   366,495
 
Total liabilities and equity $ 718,812 $ 724,195
               
PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
Table 1
Reconciliation of the three and nine months ended October 27, 2012 and October 29, 2011 net income and earnings per share to adjusted net income and adjusted earnings per share.
(UNAUDITED)
(amounts in 000's, except per share information)
 
Three Months Ended Nine Months Ended
October 27, 2012 October 29, 2011 October 27, 2012 October 29, 2011
Net income $ 3,180 $ 6,509 $ 10,414 $ 23,734
Plus:
Costs on exited brands 400 - 2,245 -
Costs of streamlining and consolidation of operations, and other strategic initiatives 936 - 2,397 -
Costs of voluntary retirement - - 2,420 -
Costs on early extinguishment of debt - - - 1,306
Duplicate interest from March 8 to April 6, 2011 - - - 745
Less:
Gain on asset sales (410) - (410)
Tax benefit (358) - (2,545) (718)
Net income, as adjusted $ 3,748 $ 6,509 $ 14,521 $ 25,067
 
 
Three Months Ended Nine Months Ended
October 27, 2012 October 29, 2011 October 27, 2012 October 29, 2011
Net income per share, diluted $ 0.21 $ 0.40 $ 0.68 $ 1.47
Net per share costs on exited brands 0.02 - 0.09 -
Net per share costs of streamlining and consolidation of operations, and other strategic initiatives 0.04 - 0.10 -
Net per share costs of voluntary retirement - - 0.10 -
Net per share costs on early extinguishment of debt - - - 0.05
Net per share duplicate interest from March 8 to April 6, 2011 - - - 0.03
Net per share gain on asset sales (0.02) - (0.02) -
Adjusted net income per share, diluted $ 0.25 $ 0.40 $ 0.95 $ 1.55
 
 
"Adjusted net income per share, diluted" consists of "net income per share, diluted" adjusted for the impact of the costs on exited brands, costs of streamlining and consolidation of operations, and other strategic initiatives, costs of voluntary retirement, early extinguishment of debt, duplicate interest from March 8, 2011 to April 6, 2011, the time during which the retired debt and the new debt were simultaneously outstanding, and gain on asset sales. These costs and gain are not indicative of our core operations and thus to get a more comparable result with the operating performance of the apparel industry, they have been removed, net of taxes, from the calculation.
PERRY ELLIS INTERNATIONAL, INC. AND SUBSIDIARIES
Table 2
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA(1)
(UNAUDITED)
(amounts in 000's)
               
Three Months Ended Nine Months Ended
October 27, 2012 October 29, 2011 October 27, 2012 October 29, 2011
 
 
Net income $ 3,180 $ 6,509 $ 10,414 $ 23,734
Plus:
Depreciation and amortization 3,424 3,369 10,314 9,982
Interest expense 3,689 3,868 11,011 12,303
Costs on early extinguishment of debt - - - 1,306
Income tax provision   1,518     2,348     4,687     11,262  
EBITDA 11,811 16,094 36,426 58,587
 
Costs on exited brands 400 - 2,245 -
Costs of streamlining and consolidation of operations, and other strategic initiatives 715 - 2,176 -
Costs of voluntary retirement - - 2,420 -
Gain on asset sales (410 ) - (410 ) -
       
EBITDA, as adjusted $ 12,516   $ 16,094   $ 42,857   $ 58,587  
 
 
 
 
Gross profit $ 75,795 $ 82,450 $ 232,860 $ 251,688
Less:
Selling, general and administrative expenses (63,984 ) (66,356 ) (196,434 ) (193,101 )
Plus:
Costs on exited brands 400 - 2,245 -
Costs of streamlining and consolidation of operations, and other strategic initiatives 715 - 2,176 -
Costs of voluntary retirement - - 2,420 -
Gain on asset sales (410 ) - (410 ) -
       
EBITDA, as adjusted   12,516     16,094     42,857     58,587  
 
 
Total revenues $ 236,248 $ 248,420 $ 711,208 $ 751,144
 
EBITDA margin percentage of revenues 5.3 % 6.5 % 6.0 % 7.8 %
 
 
(1) Adjusted EBITDA consists of (loss) earnings before interest, taxes, depreciation, amortization, costs on early extinguishment of debt, costs on exited brands, costs of streamlining and consolidation of operations, and other strategic initiatives, as well as, costs associated with voluntary retirements and the gain on sale of assets. Adjusted EBITDA is not a measurement of financial performance under accounting principles generally accepted in the United States of America, and does not represent cash flow from operations. Adjusted EBITDA is presented solely as a supplemental disclosure because management believes that it is a common measure of operating performance in the apparel industry. In addition, we present Adjusted EBITDA because we believe it assists investors and analysts in comparing our performance across periods on a consistent basis by excluding items that we do not believe are indicators of our core operating performance.

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